Page:United States Statutes at Large Volume 102 Part 4.djvu/565

 PUBLIC LAW 100-647—NOV. 10, 1988 f

102 STAT. 3535

"(A) IN GENERAL.—If—

"(i) any amount derived from a United States-owned foreign corporation would be treated as derived from sources within the United States under this subsection by reason of an item of income of such United StatesOMmed foreign corporation, "(ii) under a treaty obligation of the United States (applied without r^ard to this subsection and by treating any amount included in gross income under section 951(a)(l) as a dividend), such amount would be treated as arising from sources outside the United States, and "(iii) the taxpayer chooses the benefits of this paragraph, this subsection shall not apply to such amount to the extent attributable to such item of income (but subsections (a), (b), and (c) of this section and sections 902, 907, and 960 shall be applied separately with respect to such amount to the extent so attributable). "(B) SPECIAL RULE.—Amounts included in gross income under section 951(a)(l) shall be treated as a dividend under subparagraph (A)(ii) only if dividends paid by each corporation (the stock in which is taken into account in determining whether the shareholder is a United States shareholder in the United States-owned foreign corporation), if paid to the United States shareholder, would be treated under a treaty obligation of the United States as arising from sources outside the United States (applied without r^ard to this subsection)." (B) The amendment made by subparagraph (A) shall take effect as if included in the amendment made by section 121 of the Tax Reform Act of 1984. (5) TREATMENT OP ELECTION UNDER SECTION 338.— (A) IN GENERAL.—Subsection (h) of section 338 of the 1986 Oxie is amended by adding at the end thereof the following new paragraph:

Effective date. 26 USC 904 note.

"(16) CioORDINATION WITH FOREIGN TAX CREDIT PROVISIONS.—

Except as provided in regulations, this section shall not apply for purposes of determining the source or character of any item for purposes of subpart A of part III of subchapter N of this chapter (relating to foreign tax credit). The preceding sentence shall not apply to any gain to the extent such gain is includible in gross income as a dividend under section 1248 (determined without r^ard to any deemed sale under this section by a foreign corporation)." (B) EFFECTIVE DATE.—The amendment made by subparagraph (A) shall apply to qualified stock purchases (as defined in section 338(d)(3) of the 1986 Code) after March 31, 1988, except that, in the case of an election under section 338(h)(10) of the 1986 Code, such amendment shall apply to quedified stock purchases (as so defined) after June 10, 1987. (6) TREATMENT OP TAX-EXEMPT SHAREHOLDERS OP A DISC.—

?

(A) Section 995 of the 1986 (Dode is amended by adding at the end thereof the following new subsection: "(g) TREATMENT OP TAX-EXEMPT SHAREHOLDERS.—If any organization described in subsection (a)(2) or (b)(2) of section 511 is a shareholder in a DISC—

26 USC 338 note.

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